First Resources Part 3.1

First Resources’s share price rose to 2.07 today. Just slightly more than 2 months ago, I recommended a BUY at 1.52 in earlier post (I bought the shares at 1.54) and that was near the bottom of the 52-week low. I didn’t expect 36% return in less than 3 months.  Such a return in such a short time is more luck than anything.

I just sold out all my position in First Resources. I remember what Peter Lynch said:

“Cyclicals are like blackjack: stay in the game too long and it’s bound to take all your profit”.

I traded First Resources in-and-out twice this year. The first trade was explained here and here. Just from the trading activities, this makes me look like a speculator than investor. However, I traded based on my understanding of the company and the palm oil business in general. I estimated the value of the company and that provided me a guidance on when I should buy and when I should sell. I didn’t trade by predicting where the share price was going to move in the next few weeks or months, which is what speculators love to do.

On those 2 occasions that I bought the share, I estimated that I bought at 10-20% discount to the share price. On those 2 occasions that I sold, I estimated that the company was fairly valued, and there was little upside. At 2.07 now, I think First Resources is quite fairly valued (or perhaps, slightly overvalued). Therefore, I sold it and channel the fund to buy a cheaper palm oil company, which has higher growth potential, Bumitama. I bought it at 0.745. Will share my analysis on buying Bumitama in next post.

Interestingly, I read this article, which recently compares First Resources and Bumitama. The conclusion is a tie between these two companies. I think First Resources is managed better, but in terms of valuation, I find Bumitama more attractive at current price.

El Nino story seems to be getting louder these days, however, I still assign a very low value to weather forecast. If it does happen with a severe case, this will be like raining bonus on the plantation estate.

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